UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 15828 / July 31, 1998
SECURITIES AND EXCHANGE COMMISSION v. Calvin Douglas Brace, et
al., Civil Action No. 98-Z-1644 (D. Colo.)
The Commission filed a complaint charging Calvin Douglas
Brace (Brace), GAI Holdings, Ltd. (GAI Holdings), Howard Wesley
Huether (Huether), and G2 Resources, Ltd. (G2 Resources) with
operating between November 1995 and March 1997 a Ponzi scheme
through which they falsely promised that investors' funds would
be used to purchase nonexistent "prime bank" notes. The complaint
alleges that Brace, a resident of Colorado, and GAI Holdings, a
Bahamian corporation, raised $5.5 million from investors residing
nationwide and in Canada, of which Huether, a resident of
Alberta, Canada, and G2 Resources, a Canadian corporation, raised
$1.3 million.
The complaint alleges that Brace, Huether, GAI Holdings and
G2 Resources made numerous materially false statements and
omissions to investors concerning, among other things, the
existence of prime bank instruments and related trading programs,
investors' ability to achieve the rates of return of up to 30
percent a month, the lack of risk to investors, and the use of
investor proceeds. According to the complaint, Brace and Huether
used new investor proceeds to pay previous investors as part of a
Ponzi scheme, and diverted approximately $858,000 and $208,000 to
their respective personal uses.
The complaint, filed in the U.S. District Court for the
District of Colorado, seeks to permanently enjoin Brace, Huether,
GAI Holdings and G2 Resources, from further violations of
Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933,
Section 10(b) of the Securities Exchange Act of 1934 ("Exchange
Act"") and Rule 10b-5 thereunder. Additionally, the complaint
seeks to enjoin Huether and G2 Resources from violating Section
15(a) of the Exchange Act because they did not register as
broker-dealers before soliciting investors. The complaint also
seeks disgorgement, prejudgment interest, and civil penalties in
regard to all defendants.
The Commission thanks the Arizona Securities Commission for
its assistance in this matter.